For many Canadians who own second homes in the Palm Springs area, deciding whether to sell now or hold onto their property is an important financial decision. With the current financial and political climate, we've been talking to a number of Canadians lately at The Paul Kaplan Group, who are researching selling their homes here in Palm Springs.  With the current exchange rate favoring Canadian sellers, a strong real estate market, and potential tax implications, timing the sale of a U.S. property requires careful consideration. In this article, we’ll explore key factors to help Canadian homeowners make an informed choice.

Disclaimer: This article is for informational purposes only and does not constitute tax or financial advice. We are not tax professionals, and we strongly encourage anyone considering selling their U.S. property to consult with a qualified tax advisor in both Canada and the U.S. to fully understand their tax obligations.

The Exchange Rate Advantage for Canadian Sellers

One of the biggest financial benefits for Canadians selling their U.S. property right now is the strong U.S. dollar relative to the Canadian dollar (CAD). As of early 2025, the exchange rate sits around $1.35–$1.37 CAD per $1 USD (Source: Bank of Canada).

For sellers, this means that when converting the proceeds from a U.S. home sale back to Canadian currency, they will receive more Canadian dollars per U.S. dollar earned.

For example, if a Canadian homeowner sells a Palm Springs home for $1,000,000 USD, at an exchange rate of 1.36, they would receive $1,360,000 CAD—a significant gain simply from currency conversion. This can be especially beneficial for Canadians looking to reinvest in Canada, pay off debt, or increase their retirement savings.

Palm Springs Real Estate Market Trends

The Palm Springs real estate market remains strong, particularly for vacation homes and mid-century modern properties, which continue to attract buyers from California’s major metropolitan areas and beyond.

According to California Regional MLS (CRMLS) data, home values in Palm Springs and surrounding areas have remained stable despite rising mortgage rates. Inventory is still relatively low, and demand for seasonal and luxury properties remains high.

Additionally, February thru April tends to be the busiest time in the desert for homebuying, so the timing may be right to get your home listed sooner than later.

Tax Implications for Canadians Selling U.S. Property

Selling a home in the U.S. comes with tax responsibilities that Canadian homeowners must consider. While each situation is unique, here are some of the key tax implications:

1. U.S. Capital Gains Tax

• When a Canadian sells U.S. real estate, they are subject to U.S. capital gains tax on any profit made.
• The long-term capital gains tax rate for non-residents typically ranges from 15% to 20%, depending on the total gain and applicable deductions (Source: IRS).

2. FIRPTA Withholding (Foreign Investment in Real Property Tax Act)

• Under FIRPTA, the U.S. government requires that 15% of the sale price be withheld at closing if the seller is a foreign national (Source: IRS).
• However, if the buyer plans to use the home as a primary residence and the sale price is under $1 million USD, the withholding amount may be reduced or waived.
• Sellers can apply for a withholding certificate to reduce the withheld amount if their actual tax liability is lower than 15% of the sale price.

3. Canadian Tax on Foreign Property Sales

• In Canada, capital gains from the sale of foreign property must be reported on a tax return and converted into Canadian dollars at the exchange rate on the closing date (Source: Canada Revenue Agency (CRA)).
• To avoid double taxation, sellers can typically claim a foreign tax credit for the U.S. taxes already paid.

4. U.S. Estate Tax Considerations

• Canadians with significant U.S. assets (over $13.61 million USD in 2024) may be subject to U.S. estate tax upon death (Source: IRS). While this applies only to high-value estates, it is something to consider when planning long-term asset management.

Should You Sell Now?

Given the favorable exchange rate, strong real estate demand in Palm Springs, and potential tax considerations, this may be an excellent time for Canadian homeowners to sell their U.S. property. The key benefits include:

✅ Higher Canadian dollar returns due to the strong U.S. dollar
✅ Consistent demand for vacation homes in Palm Springs
✅ Seasonal buyer interest from Modernism Week and winter home shoppers
✅ Possible tax advantages depending on capital gains calculations

However, every homeowner’s situation is unique. It’s crucial to consult with a tax professional in both Canada and the U.S. to fully understand potential tax liabilities and ensure compliance with reporting requirements.

Here are five key resources for Canadians looking for assistance when selling their U.S. property, including tax guidance, legal considerations, and real estate regulations:

1. Canada Revenue Agency (CRA) – Reporting the Sale of Foreign Property

💻 Website: Canada Revenue Agency (CRA)

• Guidance on how to report capital gains from selling U.S. real estate.
• Information on foreign tax credits to avoid double taxation.
• Exchange rate reporting requirements for Canadian tax returns.

2. Internal Revenue Service (IRS) – FIRPTA & U.S. Capital Gains Tax

💻 Website: IRS – Real Estate Tax Center

• Explanation of capital gains tax rates for non-U.S. residents.
• FIRPTA (Foreign Investment in Real Property Tax Act) withholding details.
• Steps to apply for a withholding certificate to reduce or recover the 15% FIRPTA tax.

3. U.S. Embassy & Consulates in Canada – Cross-Border Legal & Tax Considerations

💻 Website: U.S. Embassy & Consulates in Canada

• General guidance on cross-border financial transactions.
• Information on tax treaties between Canada and the U.S.

4. Bank of Canada – Exchange Rate Information

💻 Website: Bank of Canada – Exchange Rates

• Find the official exchange rate to convert U.S. sale proceeds into Canadian dollars.
• Historical exchange rate data for tax reporting purposes.

5. Canadian Snowbird Association – Selling U.S. Property & Tax Implications

💻 Website: Canadian Snowbird Association

• Information on cross-border real estate transactions.
• Guidance on avoiding double taxation.
• Tips on withholding tax exemptions for Canadian homeowners.

Bonus Tip:

📞 Consult with a Cross-Border Tax Accountant & Real Estate Lawyer

• Consider speaking with a professional who specializes in Canadian-U.S. real estate transactions to ensure compliance with both tax systems.

Final Thoughts

If selling your Palm Springs property is part of your long-term plan, now could be a strategic time to list your home while market conditions and exchange rates are in your favor. Before making a decision, speaking with a real estate expert familiar with cross-border transactions and a qualified tax advisor can help you navigate the process smoothly.

If you're considering selling and want to discuss the best strategy for listing your home, feel free to reach out!

PAUL KAPLAN

Bennion Deville Homes, Palm Springs

www.PaulKaplanHomes.com

760-459-1396

DRE 01325586